Save the date! We're hosting our quarterly Venture Monitor webinar on Wednesday, Nov. 3, to discuss the most important trends in US venture capital.
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| Private capital will be critical in ensuring nations meet emission reduction targets | | Robust debates about national commitments to emissions reductions will dominate the UN Climate Change Conference (COP26), which starts tomorrow in Scotland.
But expect private capital to play a crucial supporting role as a key contributor to "climate finance," the broadly used term to describe funding for climate mitigation and adaptation activities.
This means private investment could reduce key climate technologies' production costs relative to their output, while also accelerating the technologies' ability to scale.
While it's clear that the unique problems presented by climate change require complex solutions, one of the most challenging aspects of the issue will be creating pathways wherein public and private interests can merge and work cooperatively.
Currently, most emerging climate technologies cannot compete with greenhouse gas-emitting alternatives and are prone to market failure due to an inability to secure financing for the initial commercial-scale deployment, according to the World Economic Forum.
As investments into climate tech are often high-risk and capital-intense, capital structures that blend different sources of public and private capital are necessary.
To learn more about the need for catalytic capital—the combined climate finance from both public and private actors—to decarbonize the economy, read my op-ed: "COP26 and the climate finance bubble."
Total climate finance reached $640 billion in 2020, according to the Climate Policy Initiative, with venture capital making up roughly 3-5% of the total.
Between 2013 and 2019, capital deployed in climate tech grew at 5x the VC industry's overall growth rate, and 2021's implacable global venture capital dealmaking pace continued in Q3, with the highest quarterly figure on record.
In fact, climate tech's three largest-ever quarters for VC deal value have occurred in 2021, reaching $30.8 billion YTD—a whopping 30% more than 2020's total. Annual exit activity continued to climb rapidly in Q3, setting a record in both exit value and count.
For more VC data and new emerging opportunities in the space, download our Q3 Climate Tech Update.
Climate tech is a young and nebulous vertical, with a fragmented investor landscape and a vastly spread startup ecosystem.
Quality investment opportunities and strong return profiles for VC funds have attracted capital, with most of the activity within the US venture ecosystem.
It's estimated that existing technologies can reduce up to 65% of emissions needed to reach net-zero by 2050, but the remaining 35% will require new technological breakthroughs that could provide opportunities for enormous growth.
For a full overview of the burgeoning climate tech startup ecosystem, download my climate tech taxonomy.
To cap a busy week where we officially launched full-time analyst coverage of the climate tech vertical, here's a summary of my latest work: Feel free to reach out with any questions or feedback, or if you would like to discuss the research.
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The story of elevated deal activity continues, with global M&A on pace to set an annual record, according to our latest Global M&A Report: - Strong stock prices, ample cash on corporate balance sheets, and cheap financing will likely sustain M&A momentum in the coming quarters.
- However, there are also headwinds, including policy shifts in China, labor shortages, supply chain woes, and elevated energy prices.
- Both Europe and North America are witnessing economic resurgence leading to aggressive dealmaking.
- Activity across multiple sectors is being driven by digitization, the evolution of consumer preferences, and the need to achieve scale or integrate vertically amid fierce competition.
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The Future of Taxis Is Electric and Asset Heavy
The ridehailing industry is facing growing regulatory pressure to decarbonize.
That presents a disruptive threat to incumbents like Uber and Lyft that don't own and operate electric vehicles.
Indeed, a new class of startups is emerging to meet the industry's evolving needs, leveraging e-mobility hubs and technologies such as fleet management software, charging stations, and battery storage to maximize utilization and improve unit economics.
We discuss how e-mobility services using EV fleets and full-time drivers could take over the current outsourced car and driver model: | | | | | |
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Our insights and data featured in the press: - Why big banks can't just replicate the "buy now, pay later" business model. [Insider]
- A look into the green venture capital surge, featuring our new climate tech coverage. [Axios]
- Intense competition has led to a "frenzied" pace of work that is creating a "fundamental shift" in how venture capitalists operate. [Vice]
- Forecasting the emerging tech startups that could be future Tesla acquisitions. [Insider]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team. | | | | | |
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Highlights from our other research published over the past couple of months:
Market updates Thematic research Emerging Technology Research (free previews) Coming next week (subject to change) - Global Fund Performance Report
- ETR: Information Security
- ETR: Mobility Tech
- Analyzing the groundbreaking Petershill IPO
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| | Since yesterday, the PitchBook Platform added: | | 361 Deals | 1555 People | 417 Companies | 30 Funds | | | | | | |
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